Joint Venture Liability
Two or more businesses may find that pooling assets and resources can result in excellent market position in a particular growth area. Depending on the level of formality of the arrangement, those businesses will be considered to be in a business “joint venture.” From the point of view of the law, joint ventures are considered to be partnerships and are therefore governed by partnership law. The structure of a business joint venture can range from relatively informal agreements that govern a working relationship, to formal vehicles organized according to a joint venture plan. An example of an “informal” business joint venture would be a strategic alliance through which two businesses pool assets and services to provide a unified offering. Formal business joint ventures can range from contractual joint ventures to business joint ventures that involve the creation of a separate legal entity. Contractual joint ventures make sense when a separate legal entity will not necessarily be beneficial and may even be harmful. For example, a joint...